Thursday, September 22, 2011

HKMA Holds Rate at 0.50% Following FOMC

The Hong Kong Monetary Authority kept its base interest rate unchanged at 0.50% following the decision of the US Federal Reserve to leave the fed funds rate unchanged at 0-0.25%, and $400B portfolio rearrangement. Norman Chan, HKMA Chief Executive, said of the FOMC announcement: "This time the Fed's new policies will not have any impact on Hong Kong's interbank (HIBOR) interest rate,". Chan did however note discomfort with the Hong Kong housing market: "We can't relax. We must continue to prevent the Hong Kong housing market from the risk of overheating. If necessary we will be ready to push out policies to safeguard Hong Kong's banking stability."The HKMA also previously held its base interest rate unchanged at 0.50%, after the FOMC met in August this year and announced rates would stay low until mid 2013. The Hong Kong Monetary Authority generally tends to follow the monetary policy decisions of the US Federal Reserve's Federal Open Market Committee as the Hong Kong Dollar is fixed against the United States Dollar. Hong Kong reported consumer price inflation of 7.9% in July, up from 5.6% in June, 5.2% in May and 4.6% in April this year. The Hong Kong dollar is fixed against the U.S. currency at an exchange rate of between HK$7.75 and HK$7.85 per dollar.